The Financial Services Commission issued a preliminary notice of rule change regarding the supervisory regulation on banking business on January 21. The proposed rule change will ease the standard for calculating loan-to-deposit ratios for banks to encourage them to supply more loans to companies and individual business owners operating outside the Seoul metropolitan area. The proposed rule change will be put up for public comment from January 22 until February 11, 2026 and go through an approval process before taking effect in the first quarter of this year.

The proposed rule change is part of a broader policy initiative intended to boost the supply of funds to regional economies. In this regard, the proportion of policy funds being supplied to non-Seoul metropolitan regions will be increased from about 40 percent in 2025 to about 45 percent by 2028. This will push up the annual volume of policy funds being supplied to regional economies by about KRW25 trillion to a total of KRW120 trillion in 2028. To promote a well-balanced growth across regions, National Growth Fund, which will make investments in high-tech and future growth industries, will also allocate about 40 percent of its total investments to regions outside the Seoul metropolitan area.

There will also be efforts to boost the supply of funds to regions from private financial companies. The FSC plans to upgrade rules and provide incentives to improve the competitiveness of regional banks and strengthen the function of savings banks and mutual finance businesses in providing regional finance. In this regard, the proposed rule change on banks’ loan-to-deposit ratio is intended to provide incentive for banks to supply more funds to regional economies.

Under the current system, banks’ issuance of loans to companies, individual business owners, and households are weighted 85 percent, 100 percent, and 115 percent, respectively. However, with the rule change in place, the weight applied for calculating banks’ loan-to-deposit ratios will be reduced by 5 percentage points each for loans issued to companies (80 percent) and individual business owners (95 percent) operating outside the Seoul metropolitan area. Under the revised standard, banks’ lending capacity for companies and individual business owners operating outside the Seoul metropolitan area is expected to be expanded by up to KRW21 trillion.

* Please refer to the attached PDF for details.